CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

A temporary difference is one that ______
A. is caused by an item not taxable on the tax return but included in pretax accounting income.
B. is caused by an item not deductible for tax purposes but used in computing financial reporting income.
C. represents the difference between the tax basis of an asset or a liability and its reported balance sheet amount and that is expected to result in taxable or deductible amounts in future years.
Explanation: A temporary difference is one that is caused by using different methods on the tax return and the financial accounting records, such that the basis for the affected asset and liability is different over the life of the asset or liability. The difference is temporary because it will reverse by the end of the life of the asset or liability.

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